[Federal Register Volume 65, Number 179 (Thursday, September 14, 2000)]
[Notices]
[Pages 55664-55665]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-23613]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43260; File No. SR-Phlx-00-51]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to the Reporting Structure of the Internal 
Audit Department

September 7, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 24, 2000, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.10b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend its By-Law Article X, Section 10-9, 
to state that the Exchange's Internal Audit Department will report to 
the Audit Committee of the Exchange. The text of the proposed rule 
change is available at the Office of the Secretary, the Exchange, and 
at the Commission.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Currently, pursuant to Phlx By-law Article X, Section 10-9(b), the 
Internal Audit Department reports to both the Audit Committee and the 
General Counsel of the Exchange. The purpose of the proposed By-Law 
amendment is to change the reporting structure of the Internal Audit 
Department so that it reports only to the Audit Committee, a body 
composed in such a way that facilitates the exerecise of independent 
judgment in oversight matters relating to the Exchange.\3\ The proposed 
rule change should enhance the independence of the Internal Audit 
Department \4\ and is consistent with the

[[Page 55665]]

responsibility of the Audit Committee to review the actions of the 
Internal Audit Department. The proposed amendment should also conform 
the reporting structure of the Internal Audit Department to industry 
practice.
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    \3\ The Audit Committee consists of three members who are public 
members of the Exchange's Board. Audit Committee members cannot 
serve in a management capacity with the Exchange or any affiliate, 
and must be free of any other relationships that would interfere 
with the exercise of independent judgment. Phlx By-Law Article X, 
Section 10-9(a).
    \4\ See, Standard 100 of Standards for the Professional Practice 
of Internal Auditing (The Institute of Internal Auditors, 1998): 
``Internal auditors should be independent of the activities they 
audit.''
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act in general,\5\ and with Section 6(b)(5) in 
particular,\6\ in that it is designed to promote just and equitable 
principles of trade and to protect investors and the public interest by 
clarifying the reporting structure of the Internal Audit Department.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participations or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    The foregoing proposed rule change is concerned solely with the 
administration of the Exchange. Therefore, the proposed rule change has 
become immediately effective pursuant to Section 19(b)(3)(A)(iii) of 
the Act \7\ and Rule 19b-4(f)(3) thereunder. \8\ At any time within 60 
days of the filing of such proposed rule change, the Commission may 
summarily abrogate such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240,19b-4(f)(3).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office at the 
Phlx. All submissions should refer to File No. SR-Phlx-00-51 and should 
be submitted by October 5, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-23613 Filed 9-13-00; 8:45 am]
BILLING CODE 8010-01-M